Every contractor knows that once you’ve received your general contractor’s license, there is a required annual minimum of continuing education courses you must take in order to maintain that license. In the worst-case scenario, failure to complete those required continuing education courses can lead to the lapse of your contractor’s license, as well as suspension or even revocation of the license.
If that should happen, what is your liability? Can you keep working or is that a violation of the law? Are there criminal penalties? Is there a pathway to get your license back, or can it be revoked for good? And what if you were operating under an expired license but didn’t know about it? It’s important to know what the laws are if you’re going to protect your license, yourself, and your customers.
Civil or criminal liabilities
As I’ve mentioned before, it’s critical that you get to know the laws and regulations particular to your state of residence. The first and best way to stay out of legal trouble is to know what the law is and what is required to keep from breaking it.
For the most part, there is no enforcement arm within the government agencies that regulate contractor licensing. For example, here in North Carolina, there are no “contractor cops” who make regular checks on our licensing status. But that doesn’t mean that operating without a legitimate license isn’t a crime. And it doesn’t mean you can’t go to jail for simple licensing infractions.
In the state of California, those who are caught contracting without a valid license will likely have to appear before a Superior Court judge to answer to misdemeanor charges. In California, misdemeanors are offenses that can carry jail time. In fact, operating without a valid contractor’s license can carry a potential sentence of up to six months in jail and/or a $5,000 fine. This is usually in conjunction with an administrative fine of $200.00 to $15,000.00.
The consequences of operating without a license
Your local licensing board is not the only entity that can bring a lot of heat down on you for operating without a valid contractor’s license. Any person who hires you while your license is suspended or revoked as a result of your not completing continuing education courses has a right to sue you in small claims court to recover all the money paid for the work performed, even if that work was done to legal standards.
You may also be liable to the workers you’ve hired. In California, unlicensed contractors do not carry workers’ compensation or liability insurance. If an accident occurs on the job, you could be liable not only for that worker’s medical bills but any damages that the worker sues for in a civil case.
In fact, Insurance Code §2750.5, states that “an unlicensed worker performing services for which a license is required is not an independent contractor.” This means all your protections as an independent contractor are null and void.
The exception to legal liabilities for operating without a contractor’s license
In most states, there is a way to get around these potential liabilities: bid on jobs small enough to be exempt from licensing board regulation.
Here in North Carolina, a general contractor is defined as a person, firm, or corporation who manages or oversees construction projects where the cost of the project is $30,000 or greater. This means the State General Contractors License is not required if a project’s budget is under $30,000. Additionally, subcontractors typically operate under the license of the prime general contractor unless they are managing or overseeing a project.
Again, each state is different, but most states have regulations like this. If your license lapses or is suspended, you can still bid on jobs. But the problem here is two-fold:
- More than likely, you’ll be bidding against licensed contractors who are in good standing, have all the necessary insurance, and a solid reputation behind them;
- Your potential customer will more than likely perform their due diligence on you and check your status with the local regulatory agency. How do you think it will look if it shows that your license was suspended or revoked?
The easiest way to stay compliant
I’ll let you in on a little secret. There’s a really easy way to avoid all the drama, cost, and legal liabilities of having your general contractor’s license suspended or revoked: complete your continuing education courses annually and get your license renewed.
At AJCEO, we understand that this coursework is never top of mind and can seem boring at best and a waste of time at worst. That’s why we designed courses with today’s modern contractor in mind: courses that help you become a better businessman, a better contractor, and create a more profitable business. Check us out, and we’ll show you how convenient it is to complete your coursework, and how it can be some of the best time you’ve spent on your business.
And believe me, it’s much better than the alternative!